Custom, Excise & Service Tax Tribunal
Nis Sparta (Divison Of Mudra ... vs Commissioner Of Central Excise &Amp; ... on 3 October, 2018
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
West Block No. 2, R.K. Puram, New Delhi - 110 066.
Date of Hearing: 21.5.2018
Date of Pronouncement: 3.10.2018
Appeal No. ST/53376/2014-DB
(Arising out of Order-in-Original No. 63-65/ST/SRB/2014 dated 27.3.2014
passed by the Commissioner of Service Tax (Adj.), New Delhi)
M/s NIS Sparta Appellant
Vs.
CST (Adj.), New Delhi Respondent
Appearance Shri Vivek Sharma, Advocate - for the appellant Shri Amresh Jain, D.R. - for the respondent CORAM: Hon'ble Mr. Anil Choudhary, Member (Judicial) Hon'ble Mr. C.L. Mahar, Member (Technical) Final Order No. 53061/2018 Per Anil Choudhary:
The issue in this appeal is:
(a) Whether the appellant is liable to pay service tax under the category 'commercial training or coaching services' wherein they provide training to prospective insurance agent - Rs. 1,79,72,009/-;
(b) Whether appellant is liable to pay service tax on import of 'intellectual property service' - Rs. 48.73 lakhs
(c) Whether the appellant have wrongly availed and utilised Cenvat credit on the invoices which was addressed to 2 ST/53376/14-DB separate unit, working, for about the same premises and whether appellant have wrongly availed and utilised Cenvat credit in respect of non-registered branches- Rs. 88.09 lakhs.
2. The impugned Order-in-Original No. 63- 65/ST/SRB/2014 dated 27.03.2014 came to decide three show cause notices, the break-of the demand of which is as follows:
SR. No. SCN C No. & Period Commercial IPR CENVAT Credit Date Involved Coaching
1. C.No. I- 01.10.2007 to Rs. Rs. Rs.
26(494) ST/ 31.03.2010 1,78,91,307/- 36,91,038/- 88,09,781/- APR/Gr.-B-
I/78. 2009- 10/10050 dated 27.04.2011
2. Rs. 80,702/- Rs. 7,37,263/- -
3. Rs.4,44,739/- -
Total Rs. Rs. Rs.
1,79,72,009/- 48,73,040/- 88,09,781/-
3. Heard the parties and perused the written submissions. 4 . Issue (a) Service Tax demand whether arises under „commercial training or coaching service‟ 4.1 At the outset, this identical issue came before this Tribunal for the earlier period (i.e. 01.07.2003 to 09.09.2004 ) and the matter came to be decided in favour of the Appellant in their own matter - NIS Sparta Limited Vs CST, New Delhi 2015- 3 ST/53376/14-DB TIOL-209-CESTAT-DEL. This decision continues to hold the field till date. It is submitted that there is no change in facts/ circumstances and law for the periods covered in the present show cause notices as well (i.e. 01.10.2007 to 31.03.2010 and 01.04.2010 to 31.03.2011). Therefore, this issue is squarely covered by the earlier decision of this Tribunal. It is pertinent to note that the Revenue has not shown any evidence to establish, having filed an appeal against this decision of the Tribunal, nor of this decision being stayed by any higher forum. In the absence of the same, this decision of the Tribunal dated 18.12.2014 is required to be followed.
2.2 in any case, the brief transaction is, that the Appellant is an approved institution as per the „Insurance Regulatory and Development Authority (Licensing of Insurance Agents) Regulation 2000‟ (for short Insurance Regulation). To become an insurance Agent, an applicant/ candidate is required to abide by Regulation 3 to 5 of the Insurance Regulation. The candidate needs three qualifications for the purpose of becoming an Insurance Agent, as per the Insurance Regulation:
(i) he should have a statutory qualification (studied upto 12 th Standard)
(ii) he should have undergone at least, fifty hours practical training in life or general insurance business, as the case may be, from a recognized institute.4
ST/53376/14-DB
(iii) To pass an examination conducted by Insurance Institute of India, Mumbai or any other institute prescribed by regulations
23. From the Insurance Regulation, it can be clearly seen that it is mandatory for a candidate to go for practical training from the approved institute, one of which is the Appellant. Consequently, the certificate of completion of training issued by the Appellant has recognition of law (i.e Insurance Act 1938 read with Insurance Regulation). Sample certificates are enclosed in the appeal paper book. Such certificates course which had the recognition of law, were excluded from the ambit of „commercial training or coaching service‟ itself during the period of dispute (01.07.2010 to 31.03.2011) 65(26) "commercial training or coaching" means any training or coaching provided by a "commercial training or coaching centre";
65(27) "commercial training or coaching centre" means any institute or establishment providing commercial training or coaching for imparting skill or knowledge or lesson on any subject or field other than sports with or without issuance of a certificate and includes coaching or tutorial classes but does not include pre-school coaching and training centre or any institute or establishment which issued any certificate or diploma degree or any educational qualification recognized by law for the time being in force;
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ST/53376/14-DB 2.4 This question of law also stands decided in favour of assesses by the Hon‟ble Delhi High Court in the case of India Institute of Aircraft Engineering Vs. UOI 2013 (30) STR 689 (Del).
2.5 That benefit of Notification no. 24/2004-ST dated 10.09.2004 was also available, as the candidate(s) got employment.
2.6 The Service Tax law does not prescribe that only certificates given by UGC, AICTE approved institutions are entitled to the exclusion. The Respondent has also not shown any statutory provision for this purpose. Consequently, this submission of the Respondent is against the provisions of law. 2.7 lastly, the judgment cited by the Revenue, Academy of Maritime Education Trust Vs CST Chennai 2014-TIOL-1327-HC- MAD-ST has no applicability in the instant matter. This judgment does not distinguish the ruling of Delhi High Court anywhere. The Madras High Court at para 3, only records the averment of the petitioner. It can be seen that the findings of the Madras High Court commence from para 6 onwards. The Madras High Court from paras 6 to 10 has not referred to the decision of the Delhi High Court anywhere, let alone distinguish it. In this view, it is completely incorrect to state that the decision of the Delhi High Court was distinguished by the Madras High Court. More importantly, the Madras High Court referred to the decision of CESTAT - Mumbai, given in the case of Bombay Flying Club 2012 (29) STR 156. In this decision of the 6 ST/53376/14-DB Tribunal, Mumbai, the argument placed before the CESTAT was that levy of Service Tax does not arise under „commercial training or coaching service‟ given that „Bombay Flying Club‟ is a „charitable institution‟. The argument placed and the decision given by the CESTAT, Mumbai and the Hon‟ble Madras High Court, are not arising or available in the present matter, and therefore these judgments have no bearing on the issue at hand.
In any case, in the present matter, SCN has been issued by the Commissioner of Service Tax Delhi and the jurisdictional High Court for the present is Delhi. consequently, the decision of the Delhi High Court is binding in the present matter and not the decision of the Madras High Court.
3. Issue 2 - Service tax demand does not arise under „intellectual property right services‟ (IPR services) 3.1 that the Appellant entered into contract with M/s. Cross Knowledge Group, Ltd. That this contract provided- intellectual Property Rights were licensed to the Appellant free of charge. That clause 8 of the contract stated that intellectual Property Rights were licensed to the Appellant free of charge. It is settled law that something which is given free of cost cannot be charged to Service tax.
(i) Larsen and Toubro Ltd Vs. CCE 2016 (41) STR 95 (Tri-Del)
(ii) CST Vs Bhayana Builders 2018 (2) TMI1325 Supreme Court "16..................thus, on first principle itself, a value which is not part of the contract between the service provider and the service 7 ST/53376/14-DB recipient, has no relevance in the determination of the value of taxable services provided by the service provider". 3.2 that in the case at hand Cross Knowledge had sold certain training/ question-answer modules to the Appellant in consideration for an amount of US dollars 500,000/-. These modules came to be downloaded by the Appellant. it was also agreed between the parties that the consideration of US $500,000/- would be paid in three instalments. Sample invoice of one such installments payment made by the Appellant to Cross Knowledge, stands enclosed (in appeal paper book). Consequently, the transaction was a sales transaction, as held by the Hon‟ble Supreme Court in the case of Tata Consultancy Services Vs. State of AP 2005(1) SCC 308. Even if it is assumed for the sake of argument that certain licenses were given by Cross Knowledge to the Appellant that itself ipso- facto, cannot lead to a demand under IPR service. The Revenue has failed to establish that the consideration paid by the Appellant to Cross Knowledge was towards license to use trade marks, designs, patents recognized under the Indian law. The Appellant places reliance on the following decisions:
(i) Rochem Separation Systems (India) P Ltd Vs CST 2105 (39) STR 112 (Tri-Mum).
" 8. ........................The definition of intellectual property right such as trdemark, patent etc. have, to be constructed in the same sense as in the Intellectual Property Right Acts such as the Patent Act and the Trademark Act. Only rights which are 8 ST/53376/14-DB registered with the trademark/patent authorities are considered as Intellectual Property Right. The Commissioner has failed to go into these aspects in detail and has clubbed the entire service as Intellectual Property Right service."
3.3 Even if it is assumed for the sake of arguments that any service took place in the transaction at hand then also Service tax demand, if at all, arose under „information technology software service‟ and not IPR service. Reliance is placed on the decision of Suntech Business Solutions Pvt. Ltd. Vs. CCE 2017 (51) STR 446. It is settled law that the onus is on the department to make its case under the correct classification of service. Given all of the above, Service tax demand under IPR service is absolutely incorrect in law.
3.4 The appellant counsel states, that Revenue has failed to establish that the case falls under IPR service. Merely because payments were made by the Appellant to Cross Knowledge, Service tax itself cannot arise under IPR service. The Revenue has failed to establish the charge of tax itself and also failed to establish any consideration for alleged IPR service.
4. Issue 3- CENVAT Credit 4.1 CENVAT Credit has been denied only on the basis of procedural lapse. There is no dispute over the substantial availment of Credit. It has been disputed that CENVAT Credit could not have been taken on the basis of invoices which mentioned the name of the Appellant as „NIS Sparta‟ as the name had changed to „NIS Sparta‟ (Division of Mudra 9 ST/53376/14-DB Communications Pvt. Ltd)‟. It is submitted that the name was changed in accordance with High Court order (permission). That some of the vendors were not aware of the name change, and therefore on the invoice the name of NIS Sparta continued to be reflected. It is submitted that there is no dispute over the availment of service, and therefore Credit was not required to be denied. Reliance is placed on Vimal Enterprises Vs. UOI 2006 (195) ELT 267. The other reason for denial of Credit is based on the address mentioned on the invoices. Here again, there is no dispute over the substantial grounds. In any case, all the details as are prescribed in Rule 9 (2) of the CENVAT Credit Rules were present and therefore the CENVAT credit was incorrectly denied to the Appellant.
5. Extended period of limitation is not applicable in the present case. interest and penalties have also been incorrectly levied in the impugned order.
5.1 show cause notice dated 27.04.2011 raised the demands for the period 01.10.2007to 31.03.2010 on the basis of extended period of limitation. This show cause notice itself states that the demands have been raised on the basis of audits conducted from 30.04.2009 to 02.05.2009. This itself shows that the Department took around two years to issue the Show cause notice. Hence, the delay cannot be attributed to the Appelalnt and therefore the extended period of limitation is not applicable in the present case.
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ST/53376/14-DB 5.2 in any case, on the same issue, with respect to „commercial training or coaching service‟, earlier a show cause notice 01.07.2008 (refer NIS Sparta Ltd 2015-TIOL-209- CESTAT-DEL) had already been issued by the Department. Given this, Department was well aware of the issue. Hence, the present show cause notice, involving extended period and had the raise the subsequent demand within time as held by the Hon‟ble Supreme Court in the case of Nizam Sugar Factory Vs CCE 2008 (9) STR 314 (SC).
6. The ld. AR submits the following contentions:
Merely by stating that they were accredited by the IRDA, to impart such training to person(s) does not by itself establish that they were an institution authorized to issue certificate "recognized by the law for the time being in force"
6.1 In the subject case, the certificates issued by the Appellant after the completion of the training cannot be regarded as "recognized by the law for the time being in force‟, as the certificate issued by them has neither been recognized by any of the statutory authorities in the country such as UGC, AICTE, nor does the training impart skills to enable the candidates to seek employment or undertake self employment directly after such training. The said certificates only make the candidates eligible to appear for examination conducted by a statutory body viz. Indian Institute of Insurance.11
ST/53376/14-DB 6.2 The training given by the Appellant entitles a person to appear for the examination conducted by the Insurance Institute of India, Mumbai as prescribed in the Insurance Regulatory and Development Authority (Licensing of Insurance Agents) Regulations, 2000 read with Insurance Act, 1938. 6.3 The Appellant is only a „preparatory institute‟ which coaches the students to appear for the examination conducted by the statutory legal entity i.e. IRDA and it is this legal entity which issues without a certificate, which is recognized by law. It is pertinent to mention that it is the certificate of "IRDA" which is recognized by law and not the certificate of Appellant i.e. "NIS- Sparta"
7. Non applicability of earlier CESTAT order dt. 2015-TIOL-209- CESTAT DEL dt. 18.12.2014 in the Appellant‟s own case. 7.1 The aforementioned CESTAT order is entirely based on Delhi High Court Order in the case of „Indian Institute of Aircraft Engineering Vs. Union of Inida-2013(30)STR 689(Del.). This Delhi High Court Order dt. 21.05.2013 was considered and distinguished in the case of Academy of Maritime Education and Training Trust Vs. CST Chennai by High Court of Madras -2014-TIOL-1327-HC- MAD-ST dt 03.07.2014.
7.2 The High Court of Madras has observed in the case on similar facts, as follows:
"Thereafter the students who have undertaken the course has to appear for examinations conducted by the Directorate General of Civil Aviation and on successful completion of the same, the 12 ST/53376/14-DB DGCA issues‟ grants license to the student under the Aircraft Act and the Rules. What is recognized under the law is the license issued by the DGCA and not course completion certificate issued by the appellant. With that certificate, the student cannot get any employment or engage in self-employment, without clearing the examination conducted by the DGCA".
The aforementioned Madars High Court Order clearly lays the raio-decidendi that "what is recognized under law is a certificate issued by an Institute recognized by law and not a training certificate issued by a private entity like present Appellant".
8. Non applicability of case of Nizam Sugar Factory Vs. CCE, A.P. referred in 2006(197) ELT 465 (SC) under Finance Act 1994.
8.1 The ratio laid down in Niazam case was the department cannot allege suppression on the part of Assessee in subsequent Show Cause Notice when it was fully aware of the facts at the time of issuance of first notice.
8.2 The aforementioned ratio was laid down under Central Excise Act, when the Department was aware about manufacture of same item earlier. The Excise law required the manufacture to file classification/ valuation list apart from maintenance of various records, which were not done by the Appellant in Nizam Sugar factory case.
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ST/53376/14-DB The issue in Nizam Sugar case was suppression of taxable event of manufacture.
8.3 However, under Finance Act 1994, the Appellant in the instant case is working under as „Self Assessment regime‟ and was supposed to assess the tax on his own file the return as required under Section 70 of the Act. Further, in the instant case it is not only the question of suppression of particular activity by the Appellant, but also the valuation of the same. In fact under Finance Act 1994, each and every invoices is a document for assessment and suppression of the true transactional value of each invoice of the taxable activity can be called suppression.
8.4 As is clear from para 2.11 of Show Cause Notice dt. 27.04.2011, the Appellant suppressed the issuance of invoices of the taxable activity and disclosed the true transactional value received by them during October 2007 to June 2009, only on 09.04.2010, when pressed by the Department. 8.5 Hence, the allegation of suppression of transactional documents and value is proved against the Appellant.
9. "Receipt and Taxability of Intellectual Property Services (IPR)" by the Appellant.
9.1 The RUD VIII of Show Cause Notice read with Agreement dt. 05.02.2008 (RUD VI) between „Cross knowledge Group Ltd. and the Appellant clearly show that the Appellant was in receipt of IPR Services from Cross Knowledge. 14
ST/53376/14-DB 9.2 Based on this Agreement Cross knowledge provided the annual licenses which include the following services:
- Concession of a license providing access to all the modules in English (other language) available within Crossknowledge catalogue for a one year period since the issuing of each ID by the Partner.
- Use the Crossknowledge-Deployer LMS(administration, reporting, web hosting......)
- E-mail tutorial: answer in English questions asked by participants within 24 hours during the week and 48 hours during the week-end;
- E-mail technical Hot-line answer question in English within 24 hours.
9.3 The invoices on pg. 205 of Appeal paper book, discloses a substantial consideration for the receipt of IPR service.
(iv) The case law cited by the Appellant in the case of Rochem Separation System (India) P. Ltd. Vs. CST, Mumbai-I 2015 (39) STR 11 (Tri. Mumbai) is not applicable as the same was dealing with transfer of technology alongwith trade marks.
10. Having considered the rival contentions, we find that with respect to demand of service tax under the category „commercial training or coaching service‟ is concerned, the issue is covered by the judgement of this Hon‟ble Tribunal in the appellant‟s own case for the earlier period i.e. NIS Sparta Ltd. Vs. CST, Delhi, reported as 2015-TIOL-209-CESTAT-Del. This 15 ST/53376/14-DB ground is held in favour of appellant and the demand is set aside.
10.1 That, with respect to, demand of service tax on import of Intellectual Property Service, we find that the burden to prove that the activity is liable to service tax, is on the Revenue. In the present case, as per the agreement, admittedly, there is no consideration qua for IPR and the Revenue is not able to show any other evidence. Hence, when there is no consideration for IPR then the demand of service tax under IPR is liable to be set aside. Hence the demand is set aside.
10.2 We find that, with respect to, denial of Cenvat credit, the department case is, that the appellant had taken Cenvat credit on the invoices which are addressed to a separate unit, working at the same premises, and Cenvat credit in respect of non-registered branches. We find that name of the appellant i.e. from „NIS Sparta‟ to "NIS Sparta (Division of Mudra Communications Pvt. Ltd.)‟ had been changed in accordance with High Court (permission) order. Moreover, the department is not disputing that the services mentioned in the invoices has been used by the appellant. It is settled law that substantive benefit cannot be denied merely on the procedural lapse. Therefore, we held the ld. Commissioner has wrongly denied the Cenvat credit to the appellant.
11. In view of the above, appeal is allowed with consequential relief to the appellant. The penalties also stand set aside.
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ST/53376/14-DB
12. As we have allowed appeal on merits, we leave the issue of limitation open.
(Pronounced in Court on 3.10.2018) (C.L. Mahar) (Anil Choudhary) Member (Technical) Member (Judicial) RM